Share Capital in Different Jurisdictions
There is a substantial difference in how the various aspects of share capital are treated in the offshore financial centres and high-tax countries. In Europe in many countries legal requirements for minimum authorized, subscribed and paid-up capital are quite high for domestic companies. Sometimes their amount is tens of thousands of euros. It is also strictly required that these capitals should be paid-up in the full amount at the moment of incorporation or shortly thereafter. On the other hand, a company, for instance, in Germany, would be unable to pursue any business without a substantial money available.
The situation is completely different in most offshore jurisdictions. Mostly, the size of the authorized capital of an offshore company does not have a legally prescribed minimum.
BVI Business Companies are not even required to state their authorized capital and have no minimum amount of shares. Actually, flexibility is the main feature of British Virgin Islands corporate legislation. That allows company owners to choose any amount of capital they wish, and to choose deliberately how and when the capital has to be subscribed for and paid up.
For BVI Business Companies there are also no requirements to have any amount of paid-up capital, or to pay it by a certain deadline. Therefore an offshore company can easily be authorized to issue 1 share, or to have an authorized capital of 1 US dollar, or whatever its owners may wish. On the other hand, offshore company owners may state in the Articles of Association that the company will have 100 million shares, each share being issued for 100 dollars. If really carried out, the authorized and paid-up capital of such company would be 10 billion dollars.
Note: usually there would be higher Government registration fee if compared to the company with minimum capitalization.
In most offshore jurisdictions, there is a Government registration fee payable at incorporation by each offshore company. The amount of this duty depends on the size of the authorized capital of the company, or, as in the BVI, on the amount of shares a company is authorized to issue.
There is a fixed minimum of the Government duty. In BVI, it is $ 350 for a Business Company authorized to issue 50’000 shares or less. If a company issues more than 50’000 shares, the fixed Government fee is $1100. In many other offshore jurisdictions, the amount of the Government registration fee would be tied rather to the monetary value of the authorized capital than to the number-amount of its shares.
In BVI the amount of 50'000 shares is the maximum possible amount of shares that you can get registered by still paying the minimum duty. This amount usually is registered as “optimum configuration” by the offshore service provider, unless there is a different requirement from the client. It is possible to choose higher amount of shares, but higher duties will be applied in this case. You can choose also smaller amount of shares, but that does not make much sense, as the duty will not decrease anyway.
The above-mentioned concept of “optimum capital”, meaning “maximum authorized capital to which minimum duty applies” is repeating itself virtually through all offshore jurisdictions.